When applications for loans are declined, many people speedily look for alternatives. One of the commonest options is the logbook loan. A logbook loan is taken against a vehicle, and the lender rarely factors the credit score. They are fast to process and borrowers can have the cash in their accounts in less than 24 hours.
While the loans are really easy to get, their interest rates are very high. Some logbook loan companies charge APR (annual percentage interest) of as high as 400%. Many people have found themselves on the wrong side of the lenders after defaulting severally and their vehicles getting towed away. In fact, this risk is very high for most borrowers. If you already defaulted on several other loans resulting to bad credit, how will you manage a log book loan with an even bigger interest rate? Here are five things you can do to avoid defaulting on logbook loans.
- Borrowing only what you need
When a bank declines an application for a loan, it is important to scale down the amount to borrow from other stakeholders. Here you must get it right; the more you borrow, the more you will pay! Therefore, if you only needed £700, why borrow £3000? By only borrowing what you need, you can clear the problem at hand and focus all the efforts on repaying the small amount.
- Reviewing the lenders to get the best deal
The lender you select is very crucial to the entire logbook loan deal. If you select a lender who simply recovers the car after defaulting for only one month, the entire repayment period could be a nightmare. To know the right lender, you need to carry a comprehensive review and establish the following things.
- Ensure to select the lender offering the lowest APR. This means that the ultimate monthly payment will be lower.
- Look for a logbook dealer with a good reputation from past deals. If all the past clients complained of harassment by the dealer, why enter into the same problem? You should be looking for a logbook loan dealer who is understanding and realistic.
- Consider taking the loan only for a shorter period
It is pretty obvious that if you take a loan for a longer period, the charges will be more. By committing to repay the loan within the shortest period possible, it becomes easy to focus on it by redirecting every effort there. For example, instead of taking the loan for three years, consider taking it for just 12 months. If you can manage even more cash, do not hesitate to clear the amount in fewer months.
- Allow the lender to deduct the loan directly from your account
Many people usually get busy to the extent of forgetting the dates for making remittance to the lender. In other cases, you might be sent by the employer on an urgent business trip abroad leaving a huge gap on how to manage finances. The best thing to address logbook loans is allowing the lender to draw cash from the bank automatically. This way, you will never have to incur unnecessary penalties for late remittance or forgetting about it altogether.
- Drawing a good repayment strategy
Clearing a logbook loan for many months can only go well if you have an appropriate strategy. Well, take the logbook just like other loans and draw a clear plan for clearing it. Because of the high risks involved, you might want to consider only meeting the minimum repayment for other loans and direct the additional efforts towards clearing the logbook loan. You might even work on additional sources of revenue to help clear the loan faster.